WPP boss Sir Martin Sorrell (below) has been telling Campaign (which is going monthly from weekly on the eve of its 50th birthday, interestingly) that media agencies are facing a dramatic structural shift as clients decide they want “the best solution” rather than working with one agency.
This is simplification rather than surgery, he says, although they might not see things quite that way at WPP’s Maxus and MEC which are being merged.
WPP has always been “market driven” Sorrell says and the market (clients) are currently treating the big holding company-owned media agencies like those on the receiving end in a game of whack-a-mole.
Media agency margins are under ferocious pressure as more and more advertisers (notably those represented by the American Association of National Advertisers) have woken up to the reality that they make (or did make) an awful lot of their money by buying digital inventory programmatically at one price and selling it on to clients for another, in some cases delivering 60 per cent margins.
Many big clients have cut back digital trading through agencies completely while they try to find out what’s going on. All the big marcoms companies saw little or no growth in Q1 2017.
The obvious consequence is more rationalisation including job losses at the media agencies. In WPP’s case that may lead to the conclusion that media operations holding company GroupM can do the job with no need for Maxus/MEC, MediaCom and Mindshare.